Volume , Number 0
There are no articles.Commentary
There are no articles.Culture
There are no articles.Features
CEO Gravy Train Keeps On â€¦
War & Peace
The Colombia Plan: April 2000
Slippin' & Slidin'
Bully Pulpit Indeed
There are no articles.
NOTE: Z Magazine subscribers and sustainers have access to all Z Magazine articles here and in the archive. The latest Z Magazine articles available to everyone are listed in the Free Articles box at the top of the table of contents, and are starred in the list below. Questions? e-mail Z Magazine Online.
Krugman On Economists As Hacks
Following up his April attacks on the critics of the World Bank and IMF as economic illiterates, and after being criticized by them in turn as an establishment spokesperson, Paul Krugman offered readers of his New York Times column an analysis of political bias in economics (How To be A Hack, April 23, 2000). This statement is worthy of a close look for Krugmans methods of exoneration of both himself and his approved (mainstream) professional colleagues from the hack category.
One satirical device Krugman employs is to tell his readers that he has been accused of being a hired tool of global capitalism. This upset me greatly, he reports, causing him to ask his masters for a raise to compensate for the pain. This cute evasion permits him to avoid discussing the fact that he was indeed hired by the New York Times, an institution that is advertising-based and clearly a part of the corporate establishment, and that he was surely vetted by its editors and found to meet their standards, like Thomas Friedman and Richard Bernstein.
The Times published some 28 articles and reviews by Krugman in the 14 years prior to giving him a bi-weekly column, so in a sense its editors have been vetting him for a long time. Based on that output it is easy to see why they have found him worthy of regular employment: He is smart, writes with facility and assurance, and while a liberal he trims his sails to the prevailing winds and rarely departs from mainstream positions. So that just as the Times has shown little interest in the decline of labor and the increase in income inequality, Krugman also has bypassed such matters, on the grounds of political realism. In his books The Age of Diminished Expectations (1988) and Peddling Prosperity (1994), he spent considerable space chastising the conservatives for denying the facts and seriousness of the problem of the rising inequality of income distribution, but in the former book he then dismissed the issue from further consideration on the ground that its trend appears politically out of bounds and the public is tired of the subject. In Peddling Prosperity he devoted a few half-hearted lines to government policy for alleviating poverty, urging more financial aid to poor children and mothers; but he spent many pages explaining that trade and globalization do not cause poverty. In neither book does the index contain a reference to labor unions.
The Timess editors have faithfully supported NAFTA and the new international economic order buttressed by the IMF, World Bank, and World Trade Organization (WTO), and so has Krugman. Not only do both favor freer trade and investment, they have also displayed little regard for democracy when it conflicts with a perceived national interest and free trade. In this regard Krugman is at one with his fellow mainstream economists, several hundred of whom signed the letter supporting U.S. entry into a partnership with the Mexican people via NAFTA, despite the fact that the Salinas government ruled on the basis of a fraudulent election. Krugman was also one of many economists who favored NAFTA precisely because it would lock in Mexico to the reformsand lock out the Mexican peoples freedom to choose their development path. This anti-democratic thrust is also evident in Krugmans support of IMF-World Bank conditionality rules and WTO encroachments on national sovereignty, a stance that blends together free market ideology, service to the national interest of the home state, and the denial of democratic rights to the people of weaker states.
Although Krugman chides those with whom he disagrees as hacks for their carelessness in the use of fact, and for always singing the same tune, he doesnt engage in self analysis on these matters. Thus if everybody important in economics says that the natural rate of unemployment is 5.5-6 percent, Krugman says the same, and accordingly, he assured readers of the Times back on February 4, 1996 that this 5.5-6 percent unemployment limit precluded a more expansionist macro-policy. Krugman and this mainstream consensus have been refuted by the economic history of the past five years.
If the growing consensus is that government is a drag on the economy, Krugman agrees: The evidence suggests that it is difficult for the government to have any visible effect on the economys long-term growth rate (NYT, Op. Ed, September 4, 1996). This is a high-school level misreading of economic history here and abroad; U.S. industrialization in the 19th and much of the 20th century was underwritten by government, and the slowdown of growth after 1970 was almost surely tied to the weakening of public investment in the wake of the bipartisan attack on big government. That the long-term growth rate of post-World War II Japan and the Asian tigers was successfully promoted by their governments aggressive interventionary policies is not part of Krugmans evidence either (see Alice Amsdens Asias Next Giant and Robert Wades Governing the Market).
On social security, too, Krugman jumped on the crisis bandwagon in Peddling Prosperity and in a favorable book review of Pete Petersons Will America Grow Up Before It Grows Old (NYTBR, October 20, 1996). In his review he states that we are drifting inexorably toward crisis; if you think 30 years ahead, you wonder whether the Republic can be saved...the promises that are being made to those now working cannot be honored. In a subsequent posting (Slate, November 11, 1996) Krugman admitted that he went overboard in supporting Pete Petersons position on entitlements and demographics....I broke my own rules that you should always check an argument with a back-of-the-envelop calculation and by consulting with the real experts. But his errors on the phony crisis claims were egregious, and they displayed a propensity to accept conventional (and corporate) claims that can apparently overwhelm his critical and scientific sense and skills.
Some of the serious students on social security are located at the Economic Policy Institute (EPI) and Center for Economic and Policy Research (CEPR) in Washington, DC. But in his hacks article Krugman couples the EPI with the Heritage Foundation as organizations with built-in bias and manned by hacks. On the other hand, in Peddling Prosperity he relies heavily on Martin Feldstein, president of the National Bureau of Economic Research (NBER), as an expert on social security related issues. (Feldstein is also a regular contributor to the Wall Street Journals editorial page and a ranking free market ideologue.) Specifically, Krugman cited Feld- stein on the possible negative effect of social security on personal saving and capital investment. But the interesting background fact is that in one of the outstanding cases of intellectual fraud in recent times, sometimes referred to as Martygate, Feldstein was caught massaging the data on the very question of the relation of social security to savings rates, and was forced to admit a programming error that gave results supporting his hypothesis (see Superstar Feldsteins Little Mistake, Dollars and Sense, December 1980). Despite this history, Krugman not only relies on Feldstein on this very topic on which Feldstein cheated, failing to mention the earlier scandal, he even pats Feldstein on the back as a careful researcher (No matter how careful the research of conservative public finance theorists like Martin Feldstein might be,... [p. 75]). This unqualified use of Feldstein as a source is a scholarly lapse of the first magnitude.
We may therefore ask: why is Feldstein (and the NBER) a legitimate and unbiased source on social security whereas Edith Rasell, Dean Baker (with EPI for seven years, now with CEPR), Jeff Faux, and EPI are put in the hack class with Heritage? The answer is that Feldsteins biases, like Pete Petersons, are acceptable within the mainstream, and a mainstream thinker and realist like Krugman therefore treats them with the respect that they dont deserve on independent and scientific criteria. It is of interest that the New York Times repeatedly gave Feldstein the floor to advise the papers readers on social security following the disclosure that he had cheated on the subject (NYT, March 30, 1980; Oct. 5, 1980; July 27, 1998; March 31, 1999).
Similar factors affect Krug- mans treatment of the American Enterprise Institute (AEI), the Hoover Institution, and Milton Friedman and the Chicago School. AEI and Hoover are funded by foundations and individuals with an axe to grind, they are strongly ideological, and their economists consistently sing the same tune. But Hoover houses many respectable rightwingers, particularly of the Chicago School (Friedman, Becker, Sargent, etc.), and so does AEI, and both are funded by important corporate interests. Their exemptions from the hack class, as with Feldstein, are based on Krugmans own mainstream political/economic biases and relationships.
Krugman says that academic research in economics is by and large carried out without strong political bias, and what is favored is cleverness and originality, not political correctness of any stripe. Also, at Harvard and Chicago, hired guns do not flourish. This, of course, is all nonsense, based in part on a very narrow meaning attached to the phrase hired guns. A sizable fraction of high level academic economists have been hired as consultants to business firms and governments to do research and testify in hearings or legal or regulatory cases. My computation in 1978 from a required disclosure form to the FCC showed that five University of Chicago and six Harvard faculty were on the AT&T payroll at that time, and the trend toward such employment has not been downward. Furthermore, many have taken chairs, fellowships or grants from wealthy individuals or foundations and think tanks organized with an ideological purpose. It would be interesting to see Krugman explain why these economists are experts rather than hired guns.
Krugmans claim that the Chicago School economists dont have a strong political bias and are not limited by political correctness of any stripe is also untrue. The identification of the Chicago School Chile boys with the totalitarian free enterprise regime of Pinochet is notorious, and I am not aware of any Chicago School critique of the political economy of that regime. Similarly, the Chicago Schools apologetics for each merger movement as efficiency enhancing and government regulation as invariably damaging to the public interest represents a consistently held party line. That line has also been supported by some scientifically extremely dubious research, some of it even corrupt in the Feldstein mode. (For a critical review of a piece of that science, see Dennis Mueller, The Effects of Conglomerate Mergers: A Survey of the Empirical Evidence, Journal of Banking and Finance, 1977. For a critique of Chicago School corruption, I refer once again to the notable case of 1964 where George Stigler proved the inefficacy of the SEC by serious massaging of the data, sufficent to affect statistical significance tests; for this and other illustrations see my The Politicized Science, Z Magazine, February 1993, reprinted in Triumph of the Market).
In criticizing the EPI, Krugman says the test is whether the individual or institution always sings the same tune, and specifically whether the EPI would find some trade liberalization it favors. Well, the EPIs head Jeff Faux has favored Jesse Jacksons African trade bill, which calls for a substantial opening up of markets and Faux even favored the Canadian-U.S. free trade agreement. In a letter to the New York Times commenting on Krugmans hacks article, longtime EPI economist Dean Baker volunteers his own trade liberalization recommendation: that the U.S. should remove patent protection for AIDS drugs throughout the developing world, which would enhance economic efficiency and save many lives.
I wonder how many examples Krugman could cite of Chicago School economists favoring protectionist actions or enlarged or tougher regulationor cases where he has departed significantly from mainstream opinion on free trade agreements? (Krugman did, however, defend exchange controls as a substitute for the IMFs draconic high interest rate policies during the Asian financial crisis, and, like Joseph Stiglitz and Jeffrey Sachs, he sharply criticized the IMFs perverse actions at that time.)
In the case of the IMF-World Bank controversy, however, Krugman once again reverted to both his uncritical orthodoxy and carelessness with fact as well. He attacked CEPR economist Robert Naimans critique of the World Banks handling of Mozambique, where the Bank had forced Mozambique to curtail protection of the cashew refining industry and allow freer export of raw cashew nuts. Krugman argued that this protectionism had only helped the powerful refiners at the expense of millions of small farmers (A Real Nut Case, NYT, April 19, 2000).
But Krugman based his critique on free market ideology and a reiteration of World Bank apolo- getics, and ignores the 1997 Deloitte & Touche study commissioned by the World Bank, which found that Mozambiques peasants did not gain anything from liberalized exports of raw cashews and which recommended that the processing industry, recovering from the crushing war of destabilization by South Africa, be given needed protection. Krugman obviously also failed to read the detailed analysis of the World Banks policy and its background by Joseph Hanlon on which Naiman had relied. The quote above is part of Naimans letter of response to the New York Times, which the paper chose to cut, as the paper and its employees (including Krugman, Friedman, and the editors) presented a unified phalanx of support for the IMF and World Bank. In reply to all this, Krugman would no doubt point out that he is still free to write what he wants, so he is no mere hired hack.
In an earlier statement along this line, Anthony Lewis explained that writing for the Times he was perfectly free to say what he wanted to say. What he failed to grasp was that he was free because he operated within acceptable constraints that he had internalized, which is why he was hired and retained. Krugman is also free, because the paper knew that he and Thomas Friedman would work in tandem and that he would not be stepping far out of line and upsetting anybody important by giving credence to hacks. Z